Haas Company manufactures and sells one product. The following information pertains to each of the companys first three years of operations:

Variable costs per unit:

Manufacturing:

Direct materials $20

Direct labor $12

Variable manufacturing overhead $3

Variable selling and administrative $1

Fixed costs per year:

Fixed manufacturing overhead $390,000

Fixed selling and administrative expenses $210,000

During its first year of operations, Haas produced 50,000 units and sold 50,000 units. During its second year of operations, it produced 65,000 units and sold 40,000 units. In its third year, Haas produced 30,000 units and sold 55,000 units. The selling price of the companys product is $48 per unit.

Required:

1.

Compute the companys break-even point in units sold.

Break-even unit sales

units

2.	Assume the company uses variable costing:

a.

Compute the unit product cost for year 1, year 2, and year 3.

	Year 1	Year 2	Year 3
Unit product cost

b.	Prepare an income statement for year 1, year 2, and year 3.

Haas Company
Variable Costing Income Statement
	Year 1	Year 2	Year 3
Sales
Variable expenses:
Variable cost of goods sold
Variable selling and administrative
Total variable expenses
Contribution margin
Fixed expenses:
Fixed manufacturing overhead
Fixed selling and administrative
Total fixed expenses:
Net operating income (loss)

3.	Assume the company uses absorption costing:

a.

Compute the unit product cost for year 1, year 2, and year 3. (Round your intermediate and final answers to 2 decimal places.)

	Year 1	Year 2	Year 3
Unit product cost

b.

Prepare an income statement for year 1, year 2, and year 3. (Round your intermediate calculations to 2 decimal places.)

Haas Company
Absorption Costing Income Statement
	Year 1	Year 2	Year 3
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income (loss)